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Dáil Éireann Debate, Tuesday - 30 November 2021

Tuesday, 30 November 2021

Questions (195, 205)

Claire Kerrane

Question:

195. Deputy Claire Kerrane asked the Minister for Finance when he sought a reduction in VAT on domestic energy bills from the EU Commission; the way he communicated this to the Commission; and the persons he discussed it with and the response he received. [58909/21]

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Claire Kerrane

Question:

205. Deputy Claire Kerrane asked the Minister for Finance if he has sought a reduction in VAT on domestic energy bills from the EU Commission; if he has raised this matter with the Commission; and if he will make a statement on the matter. [58908/21]

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Written answers (Question to Finance)

I propose to take Questions Nos. 195 and 205 together.

As the Deputy may be aware, the Commission’s communication of 13 October 2021 set out a toolbox for Member States to allow them to tackle rising energy prices. For VAT provisions, the communication refers to the fact that Member States can decide to apply reduced rates of VAT on energy products, but only within the confines of what is already provided for in the VAT Directive. As you know, the current structure of VAT rates in the Directive provides for the application of one or two reduced rates and limits the application of those rates to supplies listed in Annex III. The Directive provides that the reduced rates may not be lower than 5%.

Within this rates structure, the Directive allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Under this framework, Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Also, Ireland has retained its historic application of one of the reduced rates of VAT, 13.5%, to a range of services (including the supply of fuel, gas, oil and electricity services) and, under the Directive, the rate applicable to such services cannot be reduced below 12%.

If Ireland did reduce the rate below 12%, even on a temporary basis, we would not be able to retain the derogation we currently hold that allows us to apply a reduced rate. This means that the VAT rate on electricity, gas, oil and fuel would increase to 23% when the temporary relief had expired.

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